Professor’s Comments on Dillard’s – January 27, 2021

A few Comments on Dillard’s

Dillard’s, DDS, was up another 17 points yesterday and is currently up another 17 points to 122 in this mornings pre-market trading . The stock was trading in the low 50s when it was identified as a top stock last month. This is an unbelievable move for a department store…a double in a little over a month!!! . You would think it was a big pharma company that just discovered a cure for cancer or the Corona virus. But no, Dillard’s is just a retailer. It’s last earnings report shows the company is still losing money. So what’s happening to cause its stock to skyrocket? Hmmm?

The answer is a short squeeze. Nothing has changed with Dillard’s basic business . It’s still a stodgy old retail company. But it does own 300+ stores and a lot of real estate. And all of a sudden, investors have decided that real estate (stores) and parking lots are worth something. I just ran a few quick numbers, and it appears their real estate alone is probably worth about $6 Billion or about $300 per share. So when you have an extremely low float of about 5.5 Million shares, (Float is the number of shares available for trading), and investors suddenly decide to purchase 80 percent of the float, there aren’t enough shares available for the shorts to buy and the price skyrockets.

For our purposes, it doesn’t matter what causes the price to move up. The algorithm behind the Member’s Watch List doesn’t know or care what’s driving the stock price. It just sees the momentum and RS picking up and puts it at the top of the List. So, enjoy the rally while it lasts and pay attention to the trend indicators. But just remember that skyrockets tend to fall back to earth quickly. When I trade rocket ships, I always take a few bucks off the table and let the rest ride. Just remember, at the end of the day, Dillard’s is still a department store. And all that real estate will likely be worth a lot less in a few months.

BTW, the two cruise lines, CCL and RCL, have moved to the #2 and #3 positions on the ‘Weak List’. Halliburton (HAL) is #1 on the List and Lululemon, another retailer is #4. CDE, the gold stock I have been shorting dropped to #7. To give you a feel for the RS of the weak stocks vs. the top 8 strong stocks, DDD has a RS of 43!!, DDS is at 28, BBY is at 20. WPRT is at 17. The next few range between 7-9. The top weak stocks only have RS rankings of 4. So the top strong stocks are still a lot stronger than the top weak stocks in terms of RS.

This tells me its still early in the roll over process.

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